19 - How does low emission canola benefit Australian farmers?

The future of grain production in Australia is not solely a story of changes in food demand and Australia’s capacity to remain competitive in food grain production. Australian grain farmers also dabble in the energy market for grains.

Explaining more; take the case of canola which has become a widely grown crop in southern Australia (See Figure 1), forming a useful rotational role in farming systems.

Figure 1. Average canola production in farming regions of Australia (2010/11-2013/14). (Source: Australian Bureau of Statistics and the CSIRO)

Much of the canola grown and exported from Australia finds its way onto European energy markets, principally for use in creating biodiesel. The European Union (EU) has an energy policy known as the Renewable Energy Directive. This policy mandates a target of life cycle greenhouse gas savings, compared to fossil fuels such as mineral diesel, for feedstock used in biofuel production in the EU.

However, from January 2018, this target of emission savings has been increased to 50% for most biofuel installations. For installations commissioned since 5 October 2015, the savings target becomes 60%. This altered policy aims to lessen greenhouse gas emissions in the EU’s transport sector by ensuring less use of mineral diesel and greater use of biofuels that have verifiable fewer emissions relative to mineral diesel.

Fortunately for Australia, in 2015 with some fore-knowledge of the likely new policy requirements in the EU, AEGIC and some members of the Australian Oilseed Federation set up and funded a project, undertaken by CSIRO researchers and emission experts, to measure and report life cycle greenhouse gas emissions associated with the production of canola in each Australian State. This investigation produced in mid-2016 a Country Report for Australia that was reviewed by experts in the EU throughout 2016 and 2017. Finally, on December 17, 2017, EU officials announced their formal acceptance of the report.

Importantly, this Country Report reveals that Australia is a low emission source of canola and so Australian canola qualifies for import into the EU, as a low emission feedstock for biodiesel production from 2018 onwards.

Australia annually exports over 1.7 million tonnes of canola to the EU and up to 70% of Australia’s canola exports go to the EU for use mostly in the biodiesel industries. In addition, the non-GM status of Australian canola means it can seamlessly flow into the food or biofuel sector within the EU. Hence Australian non-GM canola does not need to be subject to the additional expense of identity preservation within the EU, and so Australian exporters and farmers receive an additional premium for the non-GM status of their canola. Often this premium fluctuates from $30 to $70 per tonne.

Export of canola to the EU has greatly increased since the mid-2000s (see Figure 2) such that the EU is now the principal export market for Australian canola.

Figure 2. Australian exports of Canola to the EU: 2007-8 to 2015-16.

Moreover, in some regions such as Western Australia, with its small population and large production of canola (Figure 3), the export market of the EU is especially important. The price premiums in the EU for canola are very important sources of income for many grain farmers in Western Australia. Although Australian canola will remain preferred in the EU as a low emission source of feedstock for biodiesel production in 2018 there may be less available for export in 2018. Western Australia’s canola harvest in 2017 has been affected by dryness, although still around 1.8 Mmt will be harvested. The harvest has been affected by dry climate in the north and central parts of the Western Australian grainbelt. By contrast, last year’s bumper harvest was 2.2 Mmt.

Figure 3. Canola production in each State of Australia: 2009-10 to 2014-15.

So, in summary, not only does canola form a very useful practical role in farming systems by facilitating weed management, it also helps underpin the business resilience of grain farms by ensuring those businesses are not solely exposed to food markets but are also exposed to energy markets. The low emissions from Australian production of canola are an important marketing advantage that helps provide a price premium from which Australian exporters and producers of canola benefit. AEGIC, the Australian Oilseed Federation, CSIRO and the Australian government have collaborated to ensure farmers keep receiving those price premiums.